Brexit stockpiling: the risks and underwriting issues

26th April 2019

Stockpiling goods in the build-up to Brexit will create risk and underwriting issues and we’d advise all our clients to speak to us before changing their business practices.

We understand that many of our clients are concerned about
the durability of their delivery chains, the instability of the pound and unclear
trade tariffs after Britain leaves the EU. We have already seen evidence of
companies stockpiling goods to counteract this uncertainty.

Many companies see it as the only way to weather the ‘Brexit
storm’.

According to IHS Markit, February saw pre-production inventories rise to the greatest extent ever recorded, with almost 70% of businesses attributing the build-up of stocks to Brexit.

But stockpiling in itself creates a number of underwriting
and risk issues.

The most immediate and obvious concern is that stockpiling may
expose a business to underinsurance due to inadequate sums insured. On top of
this, housing more goods and raw materials takes up more space. It’s important
that businesses aren’t resorting to keeping those goods in rooms that aren’t equipped
to house them.

On top of this, extra storage solutions will create additional security risks (more materials and stock in a location makes it a more attractive prospect for thieves) and fire risks (from electrical lighting and heaters).

Stockpiling also presents safety issues, such as slips and
trips or falling items of stock if stored inappropriately.

Businesses should also be aware that when they feel
uncertainty, those who they supply are feeling it too. We’ve already seen large
scale factory closures in industries such as motor, and stockpiling should be
done with precaution of the uncertainty around demand.

It’s important that you contact Romero if there has been any changes to your standard business practices, including stockpiling.